Rate key when choosing a loan: survey

THE interest rate on a home loan is more likely to pull in customers than the brand of the lender, particularly among young home buyers, a new survey has found.

The online poll by mortgage provider Loan Market found 59 per cent of all respondents, and 65 per cent of those classed as Generation Y, said the interest rate was the major factor when choosing a lender.

Just eight per cent of the 643 respondents polled, and a mere five per cent of Gen-Yers, said the lender's brand was key in their loan decision.

"These survey results are quite surprising, given that the big four banks continue to dominate new home loan lending," Loan Market corporate spokesman Paul Smith said releasing the results on Monday.

However, he said some smaller lenders that offered niche products designed to help certain groups, such as the self-employed and property investors, could be gaining more customer support.

"The laws making it easier for people to switch lenders may have also had an impact on customer loyalty," he said.

The gradual fall in interest rates during 2012 had opened up healthy competition between lenders with significant differences in some variable and fixed-rate products on offer, he said.

Loan features such as redraw facilities were rated highly in the survey, favoured by 20 per cent of all respondents when deciding on a lender and 24 per cent of Gen-Yers.

Lender service was a low priority, however, and was sought by only 13 per cent of respondents and just six per cent of Gen-Yers.